IVA Help - A Guide To Individual Voluntary Arrangements
An Individual Voluntary Arrangement or IVA, is a government backed process that allows you to clear your unsecured debts without the need to start bankruptcy proceedings.
An IVA will enable to you reach a compromise with the creditors and avoid having to enter into bankruptcy.
An Individual Voluntary Arrangement is a legally binding contract (between both yourself and the creditor), and is governed by the same legislation as bankruptcy proceedings.
Rather than paying your debts directly to the companies concerned, an IVA enables you to set a period of time (usually five years) in which you pay an agreed payment into the IVA each month. In turn your creditors agree not to persue any legal action against you, and agree to write off any debt that is left over at the end of the IVA period.
Benefits of An IVA
- All Interest and charges are frozen.
- Monthly payment is based on what you can actually afford.
- You’ll be debt free in 5 years.
- No direct fees to be paid. The Insolvency Practitioner will collect his fees from your contributions to the creditor.
- No more worry or hassle from creditors throughout the term of the IVA arrangement.
- Avoid bankruptcy.
- Legal action and collection action will stop.
- Forces you to address your financial management issues.
- Stops temptation to get further into debt.
Do I Qualify For An IVA?
An Individual Voluntary Arrangement is available to any individual, Sole Trader, or Partners residing in England or Wales.
IVA’s can also be used as a means for home owners to avoid the risk of losing their homes in the event they be made bankrupt. Likewise, IVA’s are also available to individuals who live in rented accommodation.
There are however some financial requirements that you need to meet when applying for an IVA. To qualify for an IVA you need to have debts of over £15,000 and owe money to atleast three separate creditors.
In most cases a monthly payment of atleast £200 or more is required for the IVA to be accepted, with atleast 25p in the £ needing to be recovered. Usually, the higher the dividend, the greater the case is which in turn increases the likelihood that the IVA will be accepted.
Along with the debt requirements above, to be accepted for an IVA you will also need to be in full or part time employment, over the age of eighteen, and the IVA period must not take you over your retirement age.
Is An IVA A Good Solution For My Debt Problems?
An Individual Voluntary Arrangement isn’t the right solution for everyone’s debt problems, but if you have significant debt and are struggling to meet the current repayments, then an IVA could be a great solution.
The main benefits of an IVA include:
- No longer worry about creditors taking legal action against you for unpaid debts.
- Debts that you cant afford to pay are written off.
- Reduce your current monthly repayments
- A set time period in which you will be debt free!
Another major benefit of opting for an IVA is that it will allow you to avoid a lot of the disadvantages of filing for bankruptcy. It is worth keeping in mind however that homeowners may be required to release some of the equity in their home, but you wont be forced to sell. An IVA also doesnt involve a court process, and won’t appear in the papers or disqualify you from certain jobs in the future – unlike bankruptcy.
Will An IVA Affect My Credit Rating?
Entering into an IVA will severely affect your credit rating for a six year period. During the six years there will no credit options open to you (this includes a 5 year plan and an additional year to build up a credit history).
How Much Will My IVA Cost?
The cost of an IVA will vary from case to case, and is dependent on how much money you have available each month after budgeting for any secured debts and living expenses.
All the fees and costs will then be taken from the ongoing monthly payments you’ll make. Before the IVA is agreed, all parties (you and your creditors) will know exactly how much will be paid and received over the course of the IVA.
What Happens At The End Of The IVA?
The payments that you make during the IVA are considered to be the full and final settlement of you debts.
What this means is that once the IVA period has run its course, all of your unsecured debts will be cleared and all the creditors involved in the IVA agreement will be considered to be paid in full. You’ll be debt free.
How Do I Apply For An IVA?
Only qualified insolvency practitioners are allowed to carry out IVA’s. So to apply for an IVA you will first need to contact an insolvency practitioner for advice on processing the application.
The Insolvency Practitioner (IP), will ofcourse charge a fee for his services so it’s important you agree on a fee structure in advance of starting the IVA process.
It is definitely worth contacting more than one IP, and getting quotes for their services. Their fees will be deducted from the amount that is offered to your creditors, therefore their fee will make an impact on the their dividend and acceptance criteria.